Twelve Tips for Buyers

The following tips and techniques have been picked up from the front lines of project management and may be helpful to buyer organizations and project managers in their efforts to get the most from their outsourced project arrangements:

Align seller's goals with yours This could be a principle of managing vendors. To get the most from your vendors, make sure their goals are aligned with your goals (which should be in sync with the project goals). The terms of the contract should be set up so that all parties win together. The use of incentives, risk-reward scenarios, and requiring accepted deliverables for payment approval are popular techniques here.

Ensure WBS is appropriate Make sure the work to be outsourced is clearly defined, complete, and appropriate for the given environment. A few questions to consider:

If the vendor is off-shore, can the work be done with limited interaction with your organization?

Do you expect the vendor to help with training?

What documentation do you need or expect?

How will you transition the final deliverable(s) to your organization?

Tie acceptance of deliverables to payments A key condition to associate with any payment is formal acceptance of the targeted deliverable(s). This works better when clear acceptance criteria are established in advance.

Use phases to reduce risk An excellent way to manage the natural risk involved in outsourcing project work is to limit the commitment length by project phases. By limiting the scope of the contract to one or two project phases (specifics will depend on project risk and methodology used), you minimize your dependency on a vendor that may be underperforming, and you force a systematic review of vendor performance before committing to additional work.

The motivation behind incentives is to align the seller's objectives with the buyer's.

Understand resource and process dependencies Get a clear understanding of the resources that the vendor needs from your organization to effectively perform their work and when those resources are needed, and then proactively manage those dependencies. Use the same approach on project processesespecially deliverable reviews and testing stages.

Integrate vendor teams whenever possible Whenever the nature of project work allows it, always look for opportunities to integrate the vendor's project team with yours. Besides creating better teams and working relationships, this technique is effective for knowledge transfer and more proactive risk and issue management.

Use third party to QA vendor's activities If the risk of the project warrants, consider using a third party resource as a quality auditor on your primary vendor, including another vendor. This can be an additional project expense, and you are adding potential complexity to your management efforts, but if there is not an in-house quality department or there is lack of experience with this type of project, it is an investment that can pay considerable dividends. This arrangement helps protect the interest of the client and helps keeps everyone accountable to the contractual arrangement.

Evaluate vendor estimates Determine how you will validate the integrity and reasonableness of the vendor's cost and time estimates. Common methods include use of multiple vendor bids, requesting WBS to support estimate, and review by subject matter experts.

Look for "go to" partners Encourage your organization to seek true vendor partners rather than just view them as disposable, interchangeable suppliers. Vendors that have demonstrated the ability to get the job done, the management commitment to meet your expectations, the flexibility to resolve conflicts and honor the spirit of contractual agreements, and the ability to establish synergy and trust with your enterprise give your enterprise a strong operational advantage.

Tryout a new vendor To reduce the risk of going with a new vendor, consider giving any new vendor a tryout. Use a new vendor for a smaller project or piece of larger project first before making a commitment on a higher profile engagement. There's nothing like seeing a vendor in action to determine if they are a good fit for your enterprise.

Beware of certifications As the advantages of organizational process maturity are understood by more and more industries and enterprises, more organizations are placing a higher priority on process maturity certifications such as CMMi and ISO. Three questions to consider in regard to these certifications:

When did they earn the certification and who performed the audit?

Does the certification apply to the entire organization or only to a specific project or department?

What evidence exists that proves the organization is still operating at the certified level?